Saturday, August 12, 2017

"Erdogan targets Turkish banks over economic crisis"

If he lives long enough this guy is going to make ISIS look like a bunch of poseurs in the caliphate/sultanate restoration business.
From al-Monitor:

Turkish President Recep Tayyip Erdogan this week launched a fresh barrage of criticism and warnings
at banks, charging that they are making unfairly large profits during a
time of economic strain. Addressing the Chamber of Commerce and
Industry in the northern city of Trabzon Aug. 8, Erdogan said, “Banks
are not behaving themselves. We keep saying that interest rates must come down, but banks are using the citizens’ deposits almost as a means of fleecing them.”

Pointing to a significant increase in bank profits, Erdogan said,
“Last year, after all the distress we went through, banks had a profit
growth of 40%, which means there is a problem here. … Moreover, banks
have almost doubled their profits this year. This is a disaster.” In a
thinly veiled call to discipline the sector, Erdogan said, “I believe
our central bank and public banks will take firms steps on this issue
and pull this thing down.”

Banking, interest rates and the profitability of banks have long been
major targets for criticism in political Islam. Yet, Erdogan’s Justice
and Development Party (AKP), in power since 2002, owes much to Turkey's
increased integration in Western capitalism, through which it ensured
economic growth and boosted its popular support. The AKP government,
however, has failed to fully come to terms with the inevitable cost of
this process — the reality of interest rates — and has instead continued to grumble about banks and an “interest rate lobby”
to its conservative base, often demonizing the sector. Erdogan’s latest
outburst is just another episode of the same old story.

In the past two years, the AKP regime actively encouraged banks to
turn on the lending taps as it scrambled to pull the economy from the brink of crisis.
As a result, the business volume of banks expanded and their profits
shot up. Now, Ankara is trying to obscure its role in this outcome by
mounting a fresh attack on banks and interest rates.

That the Turkish economy
relies heavily on external funds to grow is a well-known fact. Banks
are the intermediary in the provision of those funds. Drawing on the
liquidity expansion spawned by the global financial crisis, Turkish
banks have been borrowing from abroad and then using the money to lend
to consumers and companies at home. In some years, the process has been
relatively easy, in others more difficult. In any case, Turkish banks
abide by the law and split hairs when issuing loans, with the big economic crisis of 2001
serving as a grim shadow. Since that crisis — fueled in part by poor
scrutiny of the banking sector — Turkish banks have been under tight
control, imposed mostly by the Banking Regulation and Supervision
Agency.

Until mid-2016, the banks had to make do with low profits, with
return on equity falling below 10%. As a result, the loan supply shrank.
Turkey’s political jitters and geopolitical strains worsened the
crunch, as major international credit rating agencies cut the country’s
grades. All this resulted in an economic slowdown.

The year 2015 was especially hard for the banks, leading authorities to cut the requirement for reserves
they must hold. The move increased the cash available for use and thus
paved the way for bigger profits. In other words, the 40% increase in
bank profits that Erdogan is now slamming became possible thanks to
Ankara’s support in the wake of a bad year and the state’s decision to
prop up the banks....MORE